IntelGenx Technologies Corp. - Quarter Report: 2019 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

or

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to________

Commission File Number 000-31187

INTELGENX TECHNOLOGIES CORP.

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(Exact name of small business issuer as specified in its charter)

Delaware	87-0638336
(State or other jurisdiction of   incorporation or organization)	(I.R.S. Employer Identification No.)

6420 Abrams, Ville Saint Laurent, Quebec H4S 1Y2, Canada

(Address of principal executive offices)

(514) 331-7440

(Issuer's telephone number)

(Former Name, former Address, if changed since last report)

        Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  [X]    No  [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer", "accelerated filer", "non-accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]    Accelerated filer [  ]

Non-accelerated filer  [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes [  ]    No [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

APPLICABLE TO CORPORATE ISSUERS:

93,527,474 shares of the issuer's common stock, par value $.00001 per share, were issued and outstanding as of May 9, 2019.

IntelGenx Technologies Corp.

Form 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Consolidated Balance Sheet	2
	Statement of Shareholders’ Equity	3
	Statement of Operations and Comprehensive Loss	4
	Statement of Cash Flows	5
	Notes to Financial Statements	6
Item 2.	Management's Discussion and Analysis and Results of Operations	22
Item 3.	Controls and Procedures	34

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults upon Senior Securities	34
Item 4.	Reserved	34
Item 5.	Other Information	35
Item 6.	Exhibits	35
	Signatures	35

														Accumulated
								Additional						Other			Total
		Capital Stock						Paid-In			Accumulated			Comprehensive			Shareholders'
		Number			Amount			Capital			Deficit			Loss			Equity
Balance - December 31, 2018		93,477,473		$	1		$	42,048		$	(30,896	)	$	(1,166	)	$	9,987
Modified retrospective adjustment upon adoption of ASC 842		-			-			-			49			-			49
Other comprehensive income		-			-			-			-			247			247
Options exercised (note 12)		50,000			-			21			-			-			21
Stock-based compensation (note 12)		-			-			86			-			-			86
Net loss for the period		-			-			-			(2,588	)		-			(2,588	)
Balance – March 31, 2019		93,527,473		$	1		$	42,155		$	(33,435	)	$	(919	)	$	7,802

		Operating Leases
2019 Remainder	$	107
2020		146
2021		148
2022		151
2023		153
2024		157
Thereafter		183
Total undiscounted lease payments		1,045
Less: Interest		320
Present value of lease liabilities	$	725
Current portion of operating lease liability	$	131
Operating lease liability	$	594

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction to Management's Discussion and Analysis

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") comments on our business operations, performance, financial position and other matters for the three-month period ended March 31, 2019 and 2018.

Unless otherwise indicated, all financial and statistical information included herein relates to continuing operations of the Company. Unless otherwise indicated or the context otherwise requires, the words, "IntelGenx, "Company", "we", "us", and "our" refer to IntelGenx Technologies Corp. and its subsidiaries, including IntelGenx Corp.

This MD&A should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and Notes thereto. We also encourage you to refer to the Company's MD&A for the year ended December 31, 2018. In preparing this MD&A, we have taken into account information available to us up to May 9, 2019, the date of this MD&A, unless otherwise indicated.

Additional information relating to the Company, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the "2018 Form 10-K"), is available on SEDAR at www.sedar.com and on the U.S. Securities and Exchange Commission (the "SEC") website at www.sec.gov.

All dollar amounts are expressed in U.S. dollars, unless otherwise noted.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements included or incorporated by reference in this MD&A constitute forward-looking statements within the meaning of applicable securities laws. All statements contained in this MD&A that are not clearly historical in nature are forward-looking, and the words "anticipate", "believe", "continue", "expect", "estimate", "intend", "may", "plan", "will", "shall" and other similar expressions are generally intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All forward-looking statements are based on our beliefs and assumptions based on information available at the time the assumption was made. These forward-looking statements are not based on historical facts but on management's expectations regarding future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Forward-looking statements involve significant known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those implied by forward-looking statements. These factors should be considered carefully and you should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this MD&A or incorporated by reference herein are based upon what management believes to be reasonable assumptions, there is no assurance that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this MD&A or as of the date specified in the documents incorporated by reference herein, as the case may be. We undertake no obligation to update any forward looking statements to reflect events or circumstances after the date on which such statements were made or to reflect the occurrence of unanticipated events, except as may be required by applicable securities laws. The factors set forth in Item 1A., "Risk Factors" of the 2018 Form 10-K, as well as any cautionary language in this MD&A, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you invest in the common stock, you should be aware that the occurrence of the events described as risk factors and elsewhere in this report could have a material adverse effect on our business, operating results and financial condition.

Company Background

We are a drug delivery company established in 2003 and headquartered in Montreal, Quebec, Canada. Our focus is on the development of novel oral immediate-release and controlled-release products for the pharmaceutical market.

More recently, we have made the strategic decision to enter the oral film market and have implemented commercial oral film manufacturing capability. This enables us to offer our partners a comprehensive portfolio of pharmaceutical services, including pharmaceutical R&D, clinical monitoring, regulatory support, tech transfer and manufacturing scale-up, and commercial manufacturing.

Our business strategy is to develop pharmaceutical products based on our proprietary drug delivery technologies and, once the viability of a product has been demonstrated, license the commercial rights to partners in the pharmaceutical industry. In certain cases, we rely upon partners in the pharmaceutical industry to fund the development of the licensed products, complete the regulatory approval process with the FDA or other regulatory agencies relating to the licensed products, and assume responsibility for marketing and distributing such products.

In addition, we may choose to pursue the development of certain products until the project reaches the marketing and distribution stage. We will assess the potential for successful development of a product and associated costs, and then determine at which stage it is most prudent to seek a partner, balancing such costs against the potential for additional returns earned by partnering later in the development process.

Our primary growth strategies are based on three pillars: (1) out licensing commercial rights of our existing pipeline products, (2) partnering on contract development and manufacturing projects leveraging our VersaFilm™ technology, (3) expanding our current pipeline through:

• identifying lifecycle management opportunities for existing market leading pharmaceutical products,

• develop oral film products that provide tangible patient benefits,

• development of new drug delivery technologies,

• repurposing existing drugs for new indications, and

• developing generic drugs where high technology barriers to entry exist in reproducing branded films.

Contract Development and Manufacturing based on VersaFilm™ technology
We have established a state-of-the-art manufacturing facility for the future manufacture of our VersaFilm™ products. We believe that this (1) represents a profitable business opportunity, (2) will reduce our dependency upon third-party contract manufacturers, thereby protecting our manufacturing process know-how and intellectual property, and (3) allows us to offer our development partners a full service from product conception through to supply of the finished product.

Lifecycle Management Opportunities

We are seeking to position our delivery technologies as an opportunity for lifecycle management of products for which patent protection of the active ingredient is nearing expiration. While the patent for the underlying substance cannot be extended, patent protection can be obtained for a new and improved formulation by filing an application with the FDA under Section 505(b)(2) of the U.S. Federal Food, Drug and Cosmetic Act. Such applications, known as a "505(b)(2) NDA", are permitted for new drug products that incorporate previously approved active ingredients, even if the proposed new drug incorporates an approved active ingredient in a novel formulation or for a new indication. A 505(b)(2) NDA may include information regarding safety and efficacy of a proposed drug that comes from studies not conducted by or for the applicant. The first formulation for a respective active ingredient filed with the FDA under a 505(b)(2) application may qualify for up to three years of market exclusivity upon approval. Based upon a review of past partnerships between third party drug delivery companies and pharmaceutical companies, management believes that drug delivery companies which possess innovative technologies to develop these special dosage formulations present an attractive opportunity to pharmaceutical companies. Accordingly, we believe "505(b)(2) products" represent a viable business opportunity for us.

Product Opportunities that provide Tangible Patient Benefits

Our focus will be on developing oral film products leveraging our VersaFilm™ technology that provide tangible patient benefits versus existing drug delivery forms. Patients with difficulties swallowing medication, pediatrics or geriatrics may benefit from oral films due to the ease of use. Similarly, we are working on oral films to improve bio-availability and/or response time versus existing drugs and thereby reducing side effects.

Development of New Drug Delivery Technologies

The rapidly disintegrating film technology contained in our VersaFilm™, and our AdVersa® mucosal adhesive tablet, are two examples of our efforts to develop alternate technology platforms.  As we work with various partners on different products, we seek opportunities to develop new proprietary technologies.

Repurposing Existing Drugs

We are working on the repurposing of already approved drugs for new indications using our VersaFilm™ film technology. This program represents a viable growth strategy for us as it will allow for reduced development costs, improved success rates and shorter approval times. We believe that through our repurposing program we will be able minimize the risk of developmental failure and create value for us and potential partners.

Generic Drugs with High Barriers to Entry

We plan to pursue the development of generic drugs that have certain barriers to entry, e.g., where product development and manufacturing is complex and can limit the number of potential entrants into the generic market. We plan to pursue such projects only if the number of potential competitors is deemed relatively insignificant.

Corporate

Manufacturing facility

We currently manufacture products only for clinical and testing purposes in our own facility and we do not yet manufacture products for commercial use. In order to establish ourselves as a full-service partner for our thin film products, we invested approximately $6.5 million to establish a state-of-the-art manufacturing facility for the commercial manufacture of products developed using our VersaFilm™ drug delivery technology. Since we recently received our cGMP-compliant rating from Health Canada for manufacturing and packaging activities, we anticipate the manufacturing of our products to commence on the second half of 2019.

Expansion to the existing Manufacturing Facility

On March 6, 2018 IntelGenx executed an agreement to lease approximately an additional 11,000 square feet in a property located at 6410 Abrams, St-Laurent, Quebec. The Lease has an 8 year and 5-month term commencing on October 1, 2018 and IntelGenx has retained two options to extend the Lease, with each option being for an additional five years.  Under the terms of the Lease IntelGenx will be required to pay base rent of approximately CA$74 thousand (approximately $55 thousand) per year, which will increase at a rate of CA$0.25 ($0.19) per square foot every two years.  IntelGenx plans to use the newly leased space to expand its manufacture of oral film VersaFilm TM.

The Company has initiated a project to expand the existing manufacturing facility, the timing of which will be dictated in part by the completion of agreements with our commercial partners as well as obtaining the necessary funding.  This expansion became necessary following requests by commercial partners to increase manufacturing capacity and provide solvent film manufacturing capabilities.  The new facility should create a fivefold increase of our production capacity in addition to offering a one-stop shopping opportunity to our partners and provide better protection of our Intellectual Property. The Company has signed agreements in the amount of Euro1,911 thousand with three suppliers with respect to equipment for solvent film manufacturing.  As at March 31, 2019 an amount of Euro1,425 thousand has been paid.

Most recent key developments

On February 07, 2019, the Company appointed Dr. Rodolphe Obeid to the position of Vice President, Operations of IntelGenx Corp.  Dr. Obeid is an expert in drug delivery systems and polymeric assemblies, who has developed strong technical expertise across a range of operations functions, with a particular emphasis on oral film manufacturing processes, lean manufacturing practices and continuous improvement initiatives. He has held a number of progressive management positions at IntelGenx. Most recently, he served as IntelGenx' Senior Director of Operations, with responsibility for the direction, strategy, planning and execution of IntelGenx' manufacturing operations. In his new role as Vice President, Operations, Dr. Obeid will oversee all operational activities, including manufacturing, packaging, facilities and maintenance, production planning and supply chain management. In addition, he will manage process development and manufacturing scale-up of all internal and external pharmaceutical film projects.

On February 11, 2019, the Company announced the Decision to Grant notice from the Japanese Patent Office to issue a patent entitled "Instantly wettable oral film dosage form without surfactant or polyalcohol."  Once the JPO's administrative process is complete, the patent that issues from this application will provide intellectual property protection in Japan for the formulation of IntelGenx' VersaFilm™ technology used in its RIZAPORT^® product, through 2034. RIZAPORT^® is an oral thin film formulation of rizatriptan benzoate for the treatment of acute migraines. The Decision to Grant notice is the final approval stage and precedes actual granting, which is expected shortly after the Decision. The identification number is Japanese Patent Application 2016-530631. IntelGenx received a similar formulation patent covering its RIZAPORT^® VersaFilm™ technology from the European Patent Office in 2018 and from the United States Patent and Trademark Office in 2016, and has additional applications pending in other countries.

On February 14, 2019, the Company announced that Montreal's Douglas Mental Health University Institute had agreed to participate in IntelGenx's Montelukast VersaFilm™ Phase 2a clinical trial in patients with mild to moderate Alzheimer's Disease. In addition, IntelGenx was also honoured to announce that world-renowned neurologist and clinical researcher, Serge Gauthier MD, FRCPC, had agreed to serve as the site's lead investigator.

Dr. Gauthier is a Professor in the Departments of Neurology & Neurosurgery, Psychiatry and Medicine at McGill University; and Director of the Alzheimer Disease and Related Disorders Research Unit of the McGill Center for Studies in Aging at Douglas Hospital. Dr. Gauthier is also the founder of the Canadian Consortium of Centers for Clinical Cognitive Research (C5R), a not-for-profit research network that facilitates collaboration and partnerships between pharmaceutical companies and Canadian dementia researchers. C5R research sites conduct clinical trials to research and develop treatments for patients with cognitive impairment, AD, as well as other forms of dementia. In addition to authoring numerous research papers, journal articles, and book chapters, he edited an internationally cited textbook titled Clinical Diagnosis and Management of Alzheimer's Disease and co-authored a book for the general public titled La maladie d'Alzheimer: Le guide. Dr. Gauthier was named a member of the Order of Canada in 2015 and Knight of the Ordre National du Québec (2017) for his contributions in the area of Alzheimer's disease research.

Immediately following the end of the quarter, on April 02, 2019, the Company received a Complete Response Letter from the U.S. Food and Drug Administration regarding its resubmitted 505(b)(2) New Drug Application for RIZAPORT^® VersaFilm™ for the treatment of acute migraines.  The issues cited in the CRL relate to the Chemistry, Manufacturing and Controls section of the application. The Agency requested additional information, but no new bioequivalence study.

Subsequent to the quarter, on May 8, 2019, the Company announced that it has entered into a definitive worldwide agreement with Aquestive Therapeutics, Inc. ("Aquestive"), a specialty pharmaceutical company focused on developing and commercializing differentiated products to solve therapeutic problems, for the co-development and commercialization of Tadalafil oral films (the "Agreement") for the treatment of erectile dysfunction ("ED").

Under the terms of the Agreement, IntelGenx and Aquestive will each grant to the other exclusive worldwide licenses to their respective intellectual property relating to tadalafil oral film formulation and manufacturing. The companies will jointly undertake further co-development and commercialization of Tadalafil oral film products, and will equally share (50/50) net profits from worldwide product sales. In connection with the Agreement, Aquestive has also granted a non-exclusive, royalty bearing U.S. license to any of its intellectual property that may relate to the formulation and manufacturing of IntelGenx's rizatriptan oral film product, RIZAPORT®.  IntelGenx will pay Aquestive a royalty equal to 10% of all payments received by IntelGenx from third parties for U.S. product related milestones and sales. 

Aquestive previously submitted a new drug application ("NDA") for its tadalafil oral film for the treatment of ED to the U.S. Food and Drug Administration ("FDA"). In November 2018, Aquestive received a complete response letter ("CRL") from the FDA requesting limited additional data from healthy volunteers. Under the terms of the Agreement, both companies will cooperate in responding to the FDA's CRL.

Further subsequent to the end of the quarter, on May 8, 2019, the Company announced, that its Board of Directors appointed André Godin to the position of President, in addition to his current position as the Company's Chief Financial Officer. In his newly expanded role, Mr. Godin will have overall responsibility for day-to-day operations, financial reporting and budgeting, as well as managing the Company's relationships and interactions with the investment community.  He will continue to report to the Company's CEO, Dr. Horst G. Zerbe.

All amounts are expressed in thousands of U.S. dollars unless otherwise stated.

Currency rate fluctuations

Our operating currency is Canadian dollars, while our reporting currency is U.S. dollars. Accordingly, our results of operations and balance sheet position have been affected by currency rate fluctuations. In summary, our financial statements for the three-month period ended March 31, 2019 report an accumulated other comprehensive loss due to foreign currency translation adjustments of $919 primarily due to the fluctuations in the rates used to prepare our financial statements, $223 of which positively impacted our comprehensive loss for the three-month period ended March 31, 2019. The following Management Discussion and Analysis takes this into consideration whenever material.

Reconciliation of Comprehensive Loss to Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)

Adjusted EBITDA is a non-US GAAP financial measure. A reconciliation of the Adjusted EBITDA is presented in the table below. The Company uses adjusted financial measures to assess its operating performance. Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than US-GAAP do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. The Company uses Adjusted EBITDA to measure its performance from one period to the next without the variation caused by certain adjustments that could potentially distort the analysis of trends in our operating performance, and because the Company believes it provides meaningful information on the Company's financial condition and operating results.

IntelGenx obtains its Adjusted EBITDA measurement by adding to comprehensive loss, finance income and costs, depreciation and amortization, income taxes and foreign currency translation adjustment incurred during the period. IntelGenx also excludes the effects of certain non-monetary transactions recorded, such as share-based compensation, for its Adjusted EBITDA calculation. The Company believes it is useful to exclude these items as they are either non-cash expenses, items that cannot be influenced by management in the short term, or items that do not impact core operating performance. Excluding these items does not imply they are necessarily nonrecurring. Share-based compensation costs are a component of employee and consultant's remuneration and can vary significantly with changes in the market price of the Company's shares. Foreign currency translation adjustments are a component of other comprehensive income and can vary significantly with currency fluctuations from one period to another. In addition, other items that do not impact core operating performance of the Company may vary significantly from one period to another. As such, Adjusted EBITDA provides improved continuity with respect to the comparison of the Company's operating results over a period of time. Our method for calculating Adjusted EBITDA may differ from that used by other corporations.

Reconciliation of Non-US-GAAP Financial Information

		Three-month period
		ended March 31,
		2019			2018
		$			$
Comprehensive loss		(2,341	)		(2,341	)
Add (deduct):
Depreciation		171			183
Finance costs		298			243
Finance income		(29	)		-
Share-based compensation		86			50
Other comprehensive loss (income)		(247	)		77
Adjusted EBITDA		(2,062	)		(1,788	)

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)

Adjusted EBITDA decreased by $274 for the three-month period ended March 31, 2019 to ($2,062) compared to ($1,788) for the three-month period ended March 31, 2018. The decrease in Adjusted EBITDA of $274 for the three-month period ended March 31, 2019 is mainly attributable to an increase in SG&A expenses of $396 before consideration of stock-based compensation and an increase in R&D expenses of $55 before consideration of stock-based compensation, offset by an increase in revenues of $177. 

Results of operations for the three-month period ended March 31, 2019 compared with the three-month period ended March 31, 2018.

		Three-month period ended March 31,
		2019			2018
Revenues	$	416		$	239
Research and Development Expenses		860			797
Selling, General and Administrative Expenses		1,704			1,280
Depreciation of tangible assets		171			183
Operating loss		(2,319	)		(2,021	)
Net loss		(2,588	)		(2,264	)
Comprehensive loss		(2,341	)		(2,341	)

Revenue

Total revenues for the three-month period ended March 31, 2019 amounted to $416, representing an increase of $177 or 74% compared to $239 for the three-month period ended March 31, 2018.  The increase for the three-month period ended March 31, 2019 compared to the last year's corresponding period is mainly attributable to an increase in R&D milestone revenues of $372 offset by a decrease in R&D revenues of $195.

Research and development ("R&D") expenses

R&D expenses for the three-month period ended March 31, 2019 amounted to $860, representing an increase of $63 or 8%, compared to $797 for the three-month period ended March 31, 2018.

The increase in R&D expenses for the three-month period ended March 31, 2019 is mainly attributable to an increase in analytical costs of $214, an increase in lab supplies of $27, as well as an increase in consulting expenses of $24, offset by a decrease in study costs of $172 and an increase in tax credits of $15.

In the three-month period ended March 31, 2019 we recorded estimated Research and Development Tax Credits of $94, compared with $79 that was recorded in the same period of the previous year.

Selling, general and administrative ("SG&A") expenses

SG&A expenses for the three-month period ended March 31, 2019 amounted to $1,704, representing an increase of $424 or 33%, compared to $1,280 for the three-month period ended March 31, 2018.

The increase in SG&A expenses for the three-month period ended March 31, 2019 is mainly attributable to increases in salaries and compensation expenses of $287 mainly attributable to DSUs granted to non-employee Directors in Q1 2019 (2018 DSUs were granted and expensed in Q2-2018), investor relations expenses of $167, and by the variation of the foreign exchange expense due to the depreciation of the CA dollar vs the US currency of $141, offset by a decrease in professional fees of $151.

Depreciation of tangible assets

In the three-month period ended March 31, 2019 we recorded an expense of $171 for the depreciation of tangible assets, compared with an expense of $183 for the same period of the previous year. 

Share-based compensation expense, warrants and stock-based payments

Share-based compensation warrants and share-based payments expense for the three-month period ended March 31, 2019 amounted to $86 compared to $50 for the three-month period ended March 31, 2018.

We expensed approximately $74 in the three-month period ended March 31, 2019 for options granted to our employees in 2017 and 2018 under the 2016 Stock Option Plan, approximately $Nil for options granted to non-employee directors in 2016, and approximately $12 for options granted to consultants in 2017 and 2018, compared with $45, $3, and $2, respectively that was expensed in the same period of the previous year.

There remains approximately $416 in stock-based compensation to be expensed in fiscal 2019 and 2020, of which $344 relates to the issuance of options to our employees from 2017 to 2019 and $72 relates to the issuance of options to consultants in 2018. We anticipate the issuance of additional options and warrants in the future, which will continue to result in stock-based compensation expense.

Key items from the balance sheet

			March 31, 2019			December 31, 2018			Increase/ (Decrease)			Percentage Increase/ (Decrease)
Current Assets		$	10,602		$	13,063		$	(2,461	)		(19%	)
Leasehold improvements and Equipment, net			6,279			6,248			31			1%
Security Deposits			722			707			15			2%
Operating lease right- of-use asset			722			0			722			100%
Current Liabilities			2,597			2,722			(125	)		(5%	)
Long-term debt			987			1,140			(153	)		(13%	)
Convertible debentures			5,231			5,047			184			4%
Convertible notes			1,114			1,073			41			4%
Operating Lease liability			594			0			594			100%
Capital Stock			1			1			0			0%
Additional Paid-in-Capital			42,155			42,048			107			1%

Going Concern

The Company has financed its operations to date primarily through public offerings of its common stock, convertible debentures, convertible notes, bank loans, royalty, up-front and milestone payments, license fees, proceeds from exercise of warrants and options, research and development revenues and the sale of U.S. royalty on future sales of Forfivo XL®.  The Company has devoted substantially all of its resources to its drug development efforts, conducting clinical trials to further advance the product pipeline, the expansion of its facilities, protecting its intellectual property and general and administrative functions relating to these operations.  The future success of the Company is dependent on its ability to develop its product pipeline and ultimately upon its ability to attain profitable operations.  As of March 31, 2019, the Company had cash and short-term investments totaling approximately $8,632.  The Company does not have sufficient existing cash and short-term investments to support operations for the next year following the issuance of these financial statements.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.  Management's plans to alleviate these conditions include pursuing one or more of the following steps to raise additional funding, none of which can be guaranteed or are entirely within the Company's control:

• Raise funding through the possible sale of the Company's common stock, including public or private equity financings.
• Raise funding through debt financing.
• Continue to seek partners to advance product pipeline.
• Initiate oral film manufacturing activities.
• Initiate contract oral film manufacturing activities.

If the Company is unable to raise capital when needed or on attractive terms, or if it is unable to procure partnership arrangements to advance its programs, the Company would be forced to delay, reduce or eliminate its research and development programs.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.  The accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.  Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.

Current assets

Current assets totaled $10,602 as at March 31, 2019 compared with $13,063 at December 31, 2018. The decrease of $2,461 is mainly attributable to decreases in short-term investments of $2,175, cash of $188, and accounts receivable of $141, offset by increases in investment tax credits receivable of $102.

Cash

Cash totaled $6,627 as at March 31, 2019 representing a decrease of $188 compared with the balance of $6,815 as at December 31, 2018. The decrease in cash on hand relates to net cash used by operating activities of $2,393 and financing activities of $138, offset by net cash provided by investing activities of $2,192.

Accounts receivable

Accounts receivable totaled $674 as at March 31, 2019 representing a decrease of $141 compared with the balance of $815 as at December 31, 2018. The main reason for the decrease is related to the collection in 2019 of revenues accounted for as at December 31, 2018.

Prepaid expenses

As at March 31, 2019 prepaid expenses totaled $395 compared with $462 as of December 31, 2018. The decrease in prepaid expenses is attributable to the advance payments in December 2018 of certain expenses that relate to services to be provided in the remainder of the year.

Investment tax credits receivable

R&D investment tax credits receivable totaled approximately $518 as at March 31, 2019 compared with $416 as at December 31, 2018. The increase is attributable to the accrual estimated and recorded for the first three months of 2019.

Leasehold improvements and equipment

As at March 31, 2019, the net book value of leasehold improvements and equipment amounted to $6,279, compared to $6,248 at December 31, 2018.

Security deposit

A security deposit in the amount of CAD$300 in respect of an agreement to lease approximately 17,000 square feet in a property located at 6420 Abrams, St-Laurent, Quebec, Canada was recorded as at March 31, 2019.  Security deposits in the amount of CAD$650 for the term loans and CAD$15 for utilities were also recorded as at March 31, 2019.

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities totaled $1,741 as at March 31, 2019 compared with $2,030 as at December 31, 2018.  The decrease in mainly attributable to the payment of R&D related expenses, professional fees and accruals accounted for as at Dec 31, 2018.

Long-term debt

Long-term debt totaled $1,712 as at March 31, 2019 (December 31, 2018 - $1,832).  An amount of $1,400 is attributable to term loan from the lender secured by a first ranking movable hypothec on all present and future movable property of the Company and a 50% guarantee by Export Development Canada, a Canadian Crown corporation export credit agency. The reimbursement of the term loan started in March 2015 and should be fully reimbursed by October 2021.

An amount of $312 is attributable to a second loan secured by a second ranking on all present and future property of the Company reimbursable in monthly principal payments starting January 2018 to December 2021. 

Convertible debentures

Convertible debentures totaled $5,231 as at March 31, 2019 as compared to $5,047 as at December 31, 2018.  The Corporation issued a total aggregate principal amount of CAD$7,600,000 ($5,687,000) of debentures at a price of CAD$1,000 ($748) per debenture in July 2018 and August 2018. The convertible debentures have been recorded as a liability.  Total transactions costs in the amount of CAD$1,237,000 ($926,000) were recorded against the liability. The accretion expense for the three-month period ended March 31, 2019 amounts to CAD$105,000 ($79,000), compared to CAD$91,000 ($73,000) for the comparative period in 2018.  The interest accrued on the convertible debentures for the three-month period ended March 31, 2019 amounts to CAD$152 thousand ($114 thousand) and is recorded in financing and interest expense.  The interest on the convertible debentures amounted to CAD$152 thousand ($120 thousand) for the three-month period ended March 31, 2018.

Convertible notes

Convertible notes totaled $1,114 as at March 31, 2019 as compared to $1,073 as at December 31, 2018. The convertible notes have been recorded as a liability.  Total transactions costs in the amount of $111 thousand were recorded against the liability.  The accretion expense for the period ended March 31, 2019 amounts to $42 ($Nil in 2018).  The interest on the convertible notes as at March 31, 2019 amounts to $24 ($Nil in 2018) and is recorded in Financing and interest expense. 

Shareholders' equity

As at March 31, 2019 we had accumulated a deficit of $33,435 compared with an accumulated deficit of $30,896 as at December 31, 2018. Total assets amounted to $18,325 and shareholders' equity totaled $7,802 as at March 31, 2019, compared with total assets and shareholders' equity of $20,018 and $9,987 respectively, as at December 31, 2018.

Capital stock

As at March 31, 2019 capital stock amounted to $0.935 (December 31, 2018: $0.935). Capital stock is disclosed at its par value with the excess of proceeds shown in Additional Paid-in-Capital.

Additional paid-in-capital

Additional paid-in capital totaled $42,155 as at March 31, 2019, as compared to $42,048 as at December 31, 2018. Additional paid in capital increased by $107 from which $21 came from proceeds from exercise of stock options and $86 from stock-based compensation attributable to the amortization of stock options granted to employees and consultants.

Taxation

As at December 31, 2018, the date of our latest annual tax return, we had Canadian and provincial net operating losses of approximately $14,934 (December 31, 2017: $9,560) and $16,498 (December 31, 2017: $10,052) respectively, which may be applied against earnings of future years. Utilization of the net operating losses is subject to significant limitations imposed by the change in control provisions. Canadian and provincial losses will be expiring between 2028 and 2038. A portion of the net operating losses may expire before they can be utilized.

As at December 31, 2018, we had non-refundable tax credits of $1,981 thousand (2017: $1,553 thousand) of which $8 thousand is expiring in 2026, $9 thousand is expiring in 2027, $165 thousand is expiring in 2028, $145 thousand is expiring in 2029, $124 thousand is expiring in 2030, $131 thousand is expiring in 2031, $164 thousand is expiring in 2032 and $109 thousand is expiring in 2033, $83 thousand expiring in 2034, $97 thousand is expiring in 2035, $135 thousand expiring in 2036 and $257 thousand expiring in 2037 and $554 thousand expiring in 2038.  We also had undeducted research and development expenses of $10,663 thousand (2017: $7,532 thousand) with no expiration date.

The deferred tax benefit of these items was not recognized in the accounts as it has been fully provided for.

Key items from the statement of cash flows

		March 31, 2019			March 31, 2018			Increase/ (Decrease		)			Percentage Increase/ (Decrease	)
Operating Activities	$	(2,393	)	$	(2,191	)	$	(202	)				(9%	)
Financing Activities		(138	)		208			(346	)				(166%	)
Investing Activities		2,192			1,077			1,115					104%
Cash - end of period		6,627			618			6,009					972%

Statement of cash flows

Net cash used in operating activities was $2,393 for the three-month period ended March 31, 2019, compared to $2,191 for the three-month period ended March 31, 2018. For the three-month period ended March 31, 2019, net cash used by operating activities consisted of a net loss of $2,588 (2018: $2,264) before depreciation, accretion expense, stock-based compensation, DSU expense and lease expense in the amount of $590 (2018: $306) and an decrease in non-cash operating elements of working capital of $395 (2018:  $233).

The net cash used in financing activities was $138 for the three-month period ended March 31, 2019, compared to net cash provided by financing activities of $208 in the same period of the previous year. An amount of $21 derives from proceeds from exercise of warrants and stock options (2018: $395) offset by repayment of term loans for an amount of $159 (2018: $187).

Net cash provided by investing activities amounted to $2,192 for the three-month period ended March 31, 2019 compared to $1,077 in the same period of 2018. The net cash provided by investing activities for the three-month period ended March 31, 2019 relates to the redemption of short-term investments of $3,731 (2018: $1,515), offset by the acquisition of short-term investments of $1,469 (2018: $Nil) and by the purchase of fixed assets of $70 (2018: $438).

The balance of cash as at March 31, 2019 amounted to $6,627, compared to $618 as at March 31, 2018. 

Off-balance sheet arrangements

We have no off-balance sheet arrangements.

Item 3.  Controls and Procedures.

    As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based upon that evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to cause the material information required to be disclosed by us in the reports that we file or submit under the Exchange Act to be recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. There have been no significant changes in our internal controls or in other factors which could significantly affect internal controls subsequent to the date we carried out our evaluation.

PART II

Item 1.  Legal Proceedings

              This Item is not applicable

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

              This Item is not applicable.

Item 3.  Defaults Upon Senior Securities

              This Item is not applicable.

Item 4.  (Reserved)

Item 5.  Other Information

              This Item is not applicable.

Item 6.  Exhibits

Exhibit 31.1
Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2
Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1
Certification of C.E.O. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2
Certification of Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 10.29+
Amendment to Employment Agreement, Horst G. Zerbe, May, 2019

Exhibit 10.30+
Amendment to Employment Agreement, Andre Godin, May 2019

Exhibit 10.31+
Amendment to Employment Agreement, Nadine Paiement, May 2019

Exhibit 10.32+
Amendment to Employment Agreement, Dana Matzen, May 2019
 

SIGNATURES

    In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INTELGENX TECHNOLOGIES CORP.
Date: May 9, 2019	By:	/s/	Horst G. Zerbe
			Horst G. Zerbe
			President, C.E.O. and
			Director
Date: May 9, 2019	By:	/s/	Andre Godin
			Andre Godin
			Principal Accounting Officer